FCC eases media-ownership rules

Agency splits 3-2; vote could trigger acquisitions

JonFriedman

WASHINGTON (CBS.MW) -- In a bitter 3-2 vote, the Federal Communications Commission agreed Monday to allow broadcasters to buy more television stations and permit a company to own newspapers and TV channels in the same city.

The move, which pitted the FCC's three Republicans against the two Democrats, casts aside decades-old government regulations and could spur more media industry mergers and acquisitions.

Republican Michael Powell, chairman of the five-member FCC board, said the new rules are more likely to withstand legal challenges than the old ones, which had been rejected by U.S. courts.

Standing pat in the face of repeated court admonishments, "as some so stridently suggest, was not a viable option," he said.

Powell also said the rules are better suited for a fast-growing media industry exposed to revolutionary shifts in technology such as the rise of satellite and the Internet.

The panel's two Democrats, however, warned that the ruling could backfire. They said it might enable a handful of companies to seize control of most of the nation's newspapers and broadcast stations, limiting the public's ability to hear alternative voices in the media.

Democratic Commissioners Michael Copps and Jonathan Adelstein said the FCC was taking the wrong path. They said the vote would harm the agency's long-enshrined goal of ensuring diversity, localism and competition in the media

"I see centralization, not localism; I see uniformity, not diversity; I see monopoly and oligarchy, not competition," Copps asserted.

Elsewhere, large media companies hailed the vote, even as they said it didn't go far enough. Consumer groups blasted the decision as bad for democracy. Both sides have promised to wage their fight in court.

New media landscape

As part of its regulatory overhaul, the FCC lifted the national broadcast cap to 45 percent from 35 percent. That means a company can own a group of stations whose signals reach nearly one half of the potential national audience.

In addition, broadcasters will be allowed to own three stations in the biggest markets, up from two. They could add a second channel in smaller markets, instead of owning just one.

The FCC kept intact a rule that bars a broadcaster from owning two of the top four rated stations in any market. Those four are usually the affiliates of the major networks -- Fox, CBS, NBC and ABC. Nor can any of the four major networks buy each another, the continuation of a long-standing rule.

Perhaps more significantly, the agency voted to drop a rule instituted in the mid-1970s that prevents companies from owning broadcast outlets and newspapers in the same city. However, the cross-ownership ban would remain in the smallest markets.

Regulations in the radio business, on the other hand, were actually tightened in some areas to limit the number of stations that a company can own in one market. Yet Adelstein charged that the FCC loosened other rules that could allow some previously off-limits deals.

The FCC acted in response to concerns about Clear Channel Communications, the radio behemoth that has been widely criticized for its perceived plain-vanilla programming and cutbacks on local news coverage. The radio operator criticized the new rules.

Great divide

In the weeks leading up to the vote, opponents turned up the heat on the FCC. The agency's computer system even crashed briefly last week after it was inundated with emails against the proposal.

The FCC, for its part, was under pressure to respond to a series of legal defeats in the U.S. District Court in Washington, which said the agency had done little to justify its existing rules.

Still, the panel's two Democrats unsuccessfully sought a delay in the FCC vote, arguing that the public needed more time to debate. Copps and Adelstein also said the FCC merely had to come up with better reasoning to defend most of its old rules, and not necessarily change them.

The court aside, the agency was also five months behind on completing its biennial review. Under a congressional law, the FCC is supposed to revisit its media rules every two years.

Nonetheless, many U.S. lawmakers have expressed alarm at the pending changes, and some urged the agency to ignore its deadline.

After the agency vote, at least five senators from both parties said they would sponsor legislation to reverse the decision.

Yet there doesn't appear to be enough support in Congress to overrule the agency on an issue to which the Bush administration has lent quiet but firm approval.

"In large part, the FCC has finally done what both Congress and the courts have asked it to do," said Rep. Billy Tauzin, R-La., the influential chairman of the House Commerce Committee and a key White House ally.

What next?

Consumer groups fear the ruling will ignite a wave of acquisitions, but Wall Street analysts are cautious about such prospects. Many expect companies to swap small properties or to engage in selective buying of TV stations and newspapers.

Sanford Bernstein analyst Tom Wolzien, for one, said he expects to see media companies begin to announce acquisitions "before the end of the year."

Still, Marla Backer of the investment bank Research Associates doubts that media companies will go a buying binge.

"I don't think there will be that much cross-ownership of media assets (TV & print, or TV & radio) as a result, but probably purchases of TV stations by some of the bigger players in markets where they previously were prohibited," she said.

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